Competition Policy - aka Antitrust

Other things being equal, it is a good thing if firms compete hard with each other.  It encourages them to be efficient and innovative, and to meet the needs of their customers. Competition can mean greater choice, and cheaper or higher quality products.  But some competition abuse, such as abuse of dominance, is hard to understand because its victims are often invisible. - businesses abandoned, careers unfulfilled, innovations stifled at birth. Even in the health sector, reduced competition - as a result of hospital mergers  - has been shown to damage patient care.  This page accordingly offers a jargon-free introduction to UK Competition Policy, and provides links to other pages which provide more detail.

In principle, of course, it is a good thing if there are hundreds of firms all competing to sell similar goods and services, and if their customers have reliable and comprehensive information about all the goods and services that are on offer.  However:

On the other hand, large manufacturing companies, businesses which are protected or subsidised, or companies which dominate an industry, can too easily become complacent and inefficient; and they may go even further and exploit their positions in order to charge higher prices and make excessive profits.  Governments in all modern economies have accordingly developed a range of policies which seek to balance one need (to grow large and efficient companies) against the other need (to protect customers against exploitation). These policies target these ...

Seven Types of Potentially Anti-Competitive Behaviour 

  1. Government protection, preference and subsidies
    • (These behaviours are tackled in the European Union by developing and defending the single market for goods and services, and by prohibiting most state aids.)
  2. Protecting inventions etc.
    • (Intellectual property legislation forbids the copying of new inventions for a number of years, but then competitors are then allowed to make their own copies)
  3. Price fixing or market sharing ("cartels")
  4. Abuse of dominant position or market power
  5. Merger control
  6. Inefficient markets ("Market Studies and Investigations")
  7. Utility monopolies and oligopolies

In addition, the UK government is increasingly keen to see customers claim compensation (by taking private actions) when a cartel or dominant company causes them damage.  The hope is that the potential cost of third party damages claims, as well as fines, can act as a deterrent.

And the government should also ensure that its own regulations and legislation - often introduced so as to protect customers - do not in fact freeze markets so that new business practices (such as those developed by low cost airlines) cannot come to the fore.

Consumer protection is a different form of regulation. Follow this link for further information.

The Agencies

Within the UK government, policy development in most of the above areas is the responsibility of the Department for Business. Day-to day, however, all the policies (except private actions) are delivered through specialist agencies, as follows:

Key Issues in Economic Regulation

Martin Stanley

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